MF Global wins approval of final wind-down plan

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MF Global Holdings won final approval of its plan to repay creditors, paving the way for the eighth-largest bankruptcy in US history to wind down under court protection.

US bankruptcy judge Martin Glenn in Manhattan yesterday overruled remaining objections to the plan. An outline of its terms was filed in January, and most major objections, including one from JP Morgan Chase, were resolved before the hearing.

Glenn's ruling came a day after the holding company's trustee, Louis Freeh, published a report that said former chief executive Jon Corzine and others mismanaged the company and failed to fix risk controls, leading to its demise.

The parent company of brokerage MF Global filed for bankruptcy on October 31, 2011, after a wrong-way US$6.3 billion trade on its own behalf on bonds of some of Europe's most indebted nations. The company, once run by former New Jersey governor and Goldman Sachs Group co-chairman Corzine, listed assets of US$41 billion and debts of US$39.7 billion.

A major hurdle to the plan was overcome in March when a JP Morgan unit resolved a dispute over the plan's treatment of an intercompany settlement, which it said had not been negotiated at arm's length.

JP Morgan also reached a US$100 million settlement over the New York-based bank's conduct in the days before and after the brokerage's collapse. That agreement followed a year of talks and resolved claims against JP Morgan, one of the brokerage's primary banks and a repository for customer property.

Remaining objections were resolved or overruled at the hearing. Sapere Wealth Management, a former customer of the MF Global brokerage, had argued that customer claims should come ahead of other creditor claims. Glenn overruled the argument, saying it was resolved by an agreement between the holding company trustee and the trustee overseeing the brokerage's wind-down.

The US Trustee, an arm of the Justice Department that oversees bankruptcies, had said the plan should not pay lawyers' fees for creditors who initially proposed the plan. Glenn deferred the issue of fees.

The Trustee had also objected to what it said were overly broad protections for third parties against future lawsuits. The US Attorney for the Southern District of New York had joined in that objection. Both parties withdrew their objections after the wording of the plan was changed slightly to resolve their concerns.

This article appeared in the South China Morning Post print edition as: